Who pays for repairs in a short sale?

Mar. 15, 2013

Laura Duncan is with Weichert's Suffern office.

Written by

Christine Gritmon

For The Journal News

The Expert

Laura Duncan Weichert Realtors 217 Route 59, Suffern, 914-755-4536

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Purchasing a home in need of repairs is often a negotiations game between the buyer and the seller. But what happens when the home in question is being sold through a short sale? Does the bank cover the cost of repairs? Does the previous owner?

The quick answer: no. Short sale properties are generally sold in “as is” condition, which leaves buyers no room to negotiate repairs. The banks also typically have little knowledge of or interest in the property and the previous owners tend not to have the money to get these repairs made.

But as with most things in life (and especially in real estate), there are always exceptions. “I’ve seen a few rare instances where the bank was willing to do a repair,” says Laura Duncan, an agent with Weichert in Suffern.

“I had one once where the pipes burst in the house. We didn’t discuss it until the buyer had the inspection completed. We did get the bank to pay because if the heat’s not working, you can’t get a conventional mortgage, so it’s beneficial to the bank that holds the loan to have a system in place.”

Be aware, though: your best shot at getting the bank to pay for repairs is before your offer is accepted. “Most of the time I advise the buyer to have an inspection completed and then to lower the value of the offer based on the repairs that are necessary,” says Duncan. “If possible, also get an estimate on the repairs that are needed and submit that with the offer; that makes the bank a little bit more negotiable. It’s best to do the inspection beforehand because once the bank accepts an offer they won’t renegotiate the price.”

Having an inspection does require an outlay of money on the potential buyer’s part, but it can wind up saving the buyer money in the long run.

So what types of needed repairs should buyers and inspectors especially look out for in short sale homes? The most common is burst pipes, which can happen when the heat is off in a vacant home during a cold spell. Mold damage is another popular culprit.

“I’ve seen some situations lately, because of the storms, where the house is already vacant and a tree lands on it,” says Duncan, “and sometimes the bank is willing to take the tree off.”

And then there is always the possibility of owner-inflicted vandalism. “Sometimes homeowners are so upset that they do damage before they leave the house,” says Duncan. “In some situations they’ll pull everything out they possibly can — the stove, built-in microwaves, I’ve seen them take a hooded stove … you can’t get a conventional mortgage if there’s no stove or no heating system.”

So how does one buy these houses, if the bank won’t pay for the repairs and lenders won’t provide a mortgage without them? “There’s always cash, or what’s called a 203K loan — a rehab loan,” explains Duncan. “So you’d finance the repairs and that’s built into the mortgage.”